Understand
1 What is meant by the term ‘contract’?
The term that is meant by contract is a legal binding agreement.
2 Identify the three elements of a valid contract.
The three elements of a valid contract is ‘Offer, Acceptance and
Consideration’.
3 Explain the significance of each of the legal cases
outlined on this page.
Pharmaceutical Society of Great Britain v Boots Cash
Chemist Ltd (1953)
The customer’s offer could be
refused here, so a contract of sale exists the moment the
checkout operator accepts the offer. – This English legal case was the first
to decide that the
customer offers to purchase the goods when she or he
takes them to the checkout.
Chappell & Co. v Nestlé Co. Ltd (1960)
In this case, Nestlé offered a cheap
music record to customers who sent them a small amount
of money plus six chocolate wrappers. These wrappers,
while of no real value, were determined by the court to be
sufficient consideration for a contract to exist. It decided
that something had been passed from one party to the
other.- Sometimes the nature of consideration is not so
straightforward.
Carlill v Carbolic Smoke Ball Co. (1893)
In this famous example of a contracts case, the
manufacturers of a flu cure promised to pay 100 pounds
($200) to anyone who caught the flu after using the
company’s Carbolic Smoke Ball. This offer appeared in a
newspaper advertisement.
Mrs Carlill bought the remedy from a chemist and used
it as directed. However, she subsequently caught the flu.
The company argued there was no contract between
Mrs Carlill and themselves as no offer was made because
it was only an advertisement. The company also claimed
that an offer cannot be made to the world at large.
Mrs Carlill won because the court decided the act of
using the smoke ball was an acceptance of the company’s
offer. It also established the fact that an offer can be
made to the general public.- The company promised to money to whoever
caught the flu from their product ( this means they made an offer to the
general public) but when Mrs Carlill caught the flu from their product
they did not pay up which means they did not abide by the contracts rules.
4 Describe two contracts you have made recently and
then answer the following questions about each one.
(a) Was the contract oral or written?
Oral
(b)
Who were the parties in the contract?
Myself and the Checkout Operator.
(c)
What consideration was given by the parties?
How much the product was and how much the operator was going to
charge me.
Think
5 Examine the following hypothetical cases. State
whether or not you think a contract exists. Discuss
the legal reasoning behind your decision. Share your
answers with the rest of the class.
(a) Gemma offers to buy Zara’s laptop computer for
$850. It is agreed they will make the exchange
when Zara delivers the laptop to Gemma’s
house. Once there, Gemma says she is no longer
interested.
I believe that it is not a contract because the one of the parties
proposed an offer, then the other party agrees to her offer but the
other party didn’t pay up.
(b) Hamaub agreed to sell his car to Colleen for
$10 000. The agreement was written and signed by
both parties, at which time Colleen paid Hamaub a
deposit of $1000. Two days later, Colleen changed
her mind and wanted her deposit back.
Yes this is a legal biding contract because both parties signed the
written contract plus she also deposited money in.
(c) An art dealer mistakenly attached a price tag
of $100 to a painting that was worth $1000. A
customer offered to buy the painting for $100
The contract has already been accepted and has gone through all
three main aspects of a contract.